Tidbits Quotations
To Accompany the September 30, 2013 edition of Tidbits
Bob Jensen at Trinity University

My Free Speech Political Quotations and Commentaries Directory and Log ---

If everyone is thinking alike, then somebody isn't thinking.
George S. Patton

The point is not that we should completely ignore issues of fiscal responsibility. It is that we are nowhere near fiscal crisis; we aren’t even looking at anything like a fiscal crisis 15 or 20 years from now. So budget deficits, entitlement reform, and all that simply don’t deserve to be policy priorities, let alone dominate the national discussion the way they did for the past few years.
Paul Krugman ignoring the the Congressional Budget Office warnings that entitlement reforms should be a priority now ---
"This Is Not A Crisis," The New York Times, September 17, 2013 ---
Jensen Comment
In other words don't do anything about the looming entitlements disaster until Zimbbwe-like inflation is the only solution to paying off entitlements. Don's worry. Most of us will be dead before a chicken egg costs $1 billion in the USA.
The Congressional Budget Office does not agree with Krugman ---

Inside the Bone Factory ---

Barack Obama beat Mitt Romney in the 2012 elections 65,909,451 Obama to 60,932,176 Romney votes.
Among the 48 million people of food stamps, how many voted for Mitt Romney?
The GOP will never win without gaining half the food stamp votes.
Here Are The States With The Most To Lose From Republican Food Stamp Cuts ---
It would do wonders for farmers if we gave food stamps to the 99%. The GOP would do better with that platform.

Read more: http://www.businessinsider.com/here-are-the-states-with-the-most-to-lose-from-republican-food-stamp-cuts-2013-9#ixzz2fWo3A8V9

Remember when US had a real leader, like … George W. Bush?
Chris Matthews, President Obama's Campaign Manager on MSNBC

If you treat every situation as a life-and-death matter, you'll die a lot of times.
Dean Smith
, American college basketball coach
As quoted in the CPA Newsletter recently

"Corrupt — and Set for Life In New York, officials convicted of fraud continue to draw taxpayer-funded pensions," by Jillian Kay Melchior, National Review, September 24, 2013 ---

A corruption conviction doesn’t necessarily stop elected officials from profiting at the taxpayers’ expense. But a new effort led by U.S. Attorney Preet Bharara aims to go after politicians’ public pensions when the courts find them guilty.

“Our primary mission is to address and to undo injustice, and, in the public-corruption context, a galling injustice that sticks in the craw of every thinking New Yorker is the almost inviolable right of even the most corrupt elected official — even after being convicted by a jury and jailed by a judge — to draw a publicly funded pensionhttp://www.trinity.edu/rjensen/FraudConclusion.htm#CrimePays until his dying day,” Bharara, attorney for the Southern District of New York, testified on September 17 at the Moreland Commission to Investigate Public Corruption. He added that “convicted politicians should not grow old comfortably cushioned by a pension paid for by the very people they betrayed in office.”

National Review Online has found that since 2008, at least four convicted politicians in New York have drawn pensions, all in excess of $3,000 per month.

Continued in article

Bob Jensen's threads on why white collar crime pays big time even if you know your going to get caught ---

Budget deficits, entitlement reform, and all that simply don’t deserve to be policy prioritie
The point is not that we should completely ignore issues of fiscal responsibility. It is that we are nowhere near fiscal crisis; we aren’t even looking at anything like a fiscal crisis 15 or 20 years from now.
So budget deficits, entitlement reform, and all that simply don’t deserve to be policy priorities, let alone dominate the national discussion the way they did for the past few years.

Paul Krugman ignoring the the Congressional Budget Office warnings that entitlement reforms should be a priority now ---
"This Is Not A Crisis," The New York Times, September 17, 2013 ---
Jensen Comment
In other words don't do anything about the looming entitlements disaster until Zimbbwe-like inflation is the only solution to paying off entitlements. Don's worry. Most of us will be dead before a chicken egg costs $1 billion in the USA.

The Congressional Budget Office does not agree with Krugman ---

Former Comptroller General and Accounting Hall of Famer Does Not Agree With Krugman
"Walker issues final report, asks CPAs to lead in fiscal responsibility ," by Ken Tysiac, Journal of Accountancy, September 17, 2013 ---

Former U.S. Comptroller General David Walker is closing a chapter in his campaign against the rising tide of government debt, but he is urging his fellow CPAs to help fight against what he calls fiscal irresponsibility by elected leaders.

Walker on Tuesday released the final report of his Comeback America Initiative, once again highlighting problems facing the finances of the U.S. federal government, states, and cities. Walker said he is closing his not-for-profit initiative to keep a long-standing commitment to his wife, Mary, to spend more time with his family.

But he is not retiring, he said, and as long as he is healthy, he won’t quit his fight for government fiscal responsibility. He called on CPAs to join him.

“People need to keep in mind that the ‘P’ in ‘CPA’ stands for ‘Public,’ ” Walker said last week during an interview with the JofA. “We have a public trust. We have to act in the public interest. We need make sure we are taking steps that improve accounting and reporting for governments. We’ve come a long way, but we’ve got a ways to go.”

The final Comeback America report presents a calculation that combines the federal government’s explicit liabilities, commitments, contingencies, and unfunded Social Security and Medicare promises.

In present-value dollars, the total in 2012 of these “off-balance-sheet obligations” was $69.7 trillion, or $221,400 per person. The total has more than tripled since 2000, when it was $19.9 trillion, according to Walker’s analysis. Walker said most states and many cities also have financial problems that mirror the federal government’s, with unfunded obligations for retirement and retiree health care, and outdated tax systems.

Although Walker said there has been a dramatic increase in the percentage of Americans concerned about the nation’s deteriorating financial condition, his report cited a CBS poll in March in which just 42% of respondents said reducing the federal budget deficit would make the nation’s economy better. Almost as many—39%—said they didn’t know enough to determine what effect reducing the deficit would have on the economy.

CPAs can lead

Against this backdrop of misunderstanding, Walker said, it is important for CPAs to use their knowledge and skills to lead the way toward a better financial future.

“We need to help make sure that our profession is in the lead, and tell the facts, the truth, the tough choices, in a professional, objective, nonpartisan, and non-ideological fashion,” he said. “We need to lead by example and make sure we practice what we preach and are putting our own finances in order with regard to planning, saving, investing, and not taking on too much debt. And we need to try to lead the way in making sure that current elected officials and those who want to represent us at the state and local level are taking these issues seriously.”

The Comeback America report describes seven strategies that Walker believes should be taken to reduce the deficit and restore financial balance to the U.S. government:

Spending and tax reforms. Ultimately, Walker believes Congress should agree to reductions in Medicare, Medicaid, Social Security, and other social insurance and health care spending. In addition, the report said, Congress should set a target for additional revenue through tax reform. If such a “grand bargain” is beyond the reach of Congress in 2013, Walker said Congress should try to reach a short-term deal to replace the sequester with more intelligent spending cuts, coupled with targeted short-term investments and budgeting/spending process reforms. Changing the metrics. The report advocates focusing on public debt as a percentage of GDP, comparing U.S. debt levels to those of other industrialized nations, and increasing transparency regarding the intergenerational implications of our current fiscal path. Engaging the public. Fiscal reform advocates need to do a better job explaining the problem in ways that everyday Americans can understand, according to the report. In addition, the report says, a more diverse audience—including college students and younger workers—should be targeted and encouraged to get involved. Getting local. In addition to explaining the problems at the federal level, the report says, advocates should describe the challenges state and local governments face. Grass-roots efforts. Although many groups are engaging the public on these issues, a more extensive grass-roots effort outside Washington is needed, the report says. Addressing the leadership deficit. The president and bipartisan leaders of Congress need to stand up and lead on this issue, the report says. Members of both parties must make difficult political choices that put the public ahead of their own party and personal reelection prospects, according to the report. Political changes. Walker calls for term limits, campaign finance reform, redistricting reform, and integrated primary elections open to all voters. He also encourages an Article V Convention to propose constitutional amendments aimed at financial, electoral, and states’ rights reforms.

“We have a dysfunctional democracy,” Walker said. “We have a republic that’s no longer representative of and responsive to the public. So, in the short term, what you have to do is make the political price for current elected officials greater for doing nothing than for making tough choices.”

Continued in article

"How to Create a Real Economic Stimulus Entitlement reform is key to shrinking the ratio of debt to GDP and making room for pro-growth tax cuts," by Martin Feldstein, The Wall Street Journal, September 16, 2013 ---

Earlier this year, former U.S. Treasury Secretary Larry Summers expressed doubts about the Federal Reserve's quantitative easing policy of buying $85 billion a month of government bonds and other long-term assets. His skepticism antagonized some Fed insiders and liberal Democrats, who recently opposed his consideration by President Obama as the next Fed chairman.

When Mr. Summers on Sunday withdrew his candidacy for the chairman's job, there was one immediate benefit: Now Larry Summers will be free to voice an even clearer and stronger critique of current policy.

The United States certainly needs a new strategy to increase economic growth and employment. The U.S. growth rate has fallen to less than 2%, and total employment is a smaller share of the population now than it was five years ago. The official unemployment rate has declined sharply (to 7.3% last month from 10% in October 2009) only because so many people have stopped looking for work or are working part-time.

The Fed's monetary policy is no longer effective in stimulating demand. The near-zero interest-rate policy and aggressive quantitative easing, it has become increasingly clear, create dangerous risks to future stability. The Fed's announcement in June that it will soon reduce the rate of buying long-term assets raised long-term rates, slowing the recovery in the housing market and other activity. And the unemployment rate is approaching the 6.5% threshold that could lead the Fed to raise short rates.

On the fiscal side, a replay of the $830 billion "stimulus" in 2009 is politically out of the question. That poorly designed package added more to the national debt than it did to aggregate spending. The national debt has increased from 37% of gross domestic product before the economic downturn to 75% now. The Congressional Budget Office warns that the debt will remain at that level for the coming decade and then rise rapidly as the aging population increases the cost of Social Security and Medicare. The large projected national debt is a drag on the economy, causing businesses and entrepreneurs to fear higher tax rates and a sharp rise in interest rates when the Fed stops its massive bond purchases.

A successful growth and employment strategy would combine substantial reductions in the relative size of the future national debt with immediate permanent tax-rate cuts and a multiyear program of infrastructure spending. The challenge is to reduce future government spending by enough to make the ratio of debt to GDP predictably lower a decade from now, despite the tax-rate cuts and near-term infrastructure spending.

Fortunately, a relatively small change in annual deficits would significantly shrink the debt ratio. With a national debt of 75% of GDP, a projected annual deficit of 4% of GDP would keep the debt rising to 100% of GDP. In contrast, a deficit of 1% would cause the debt ratio to decline year after year until it reaches 25% of GDP.

The only way to reduce future deficits without weakening incentives and growth is by cutting future government spending. The share of GDP devoted to defense and to nondefense discretionary programs is already headed to its lowest level in the past half-century. Reducing spending therefore requires slowing the growth of the benefits of middle-class retirees and cutting the spending that is built into the tax code.

Raising the age for full benefits is a simple but powerful way to slow the cost of Social Security and Medicare. Thirty years ago, Congress voted to increase gradually the age for full benefits from 65 to 67. Since then, the life expectancy at age 67 has increased by an additional three years. Congress should vote now to continue raising the full benefit age from 67 to 70. When that is fully phased in, the annual cost of Social Security benefits would be reduced by about 20%, equivalent to a saving in 2020 of $200 billion or about 1% of GDP.

Gradually raising the age of Medicare eligibility in line with the age for full Social Security benefits would achieve a budget saving of more than 1% of GDP in 2020 and later years. Individuals between ages 65 and 70 could still enroll in Medicare by paying a fair premium.

Limiting the tax breaks built into the tax code would also help. The combination of tax credits, deductions and exclusions increases the annual budget deficit by hundreds of billions of dollars. Those tax breaks are really subsidies that should be seen as government spending.

While many of the smaller tax subsidies should simply be eliminated, it would be politically impossible to eliminate such popular features as the deduction for mortgage interest or the exclusion of employer payments for health insurance. A better alternative would be to allow individuals to keep all of these tax benefits but to limit the amount by which individuals can reduce their tax liabilities in this way to 2% of adjusted gross income. This one change to the tax code would reduce the 2013 federal deficit by $140 billion or nearly 1% of GDP even if the deduction for charitable contributions was fully retained.

Slower entitlement growth and reduced tax expenditures should be phased in slowly to avoid weakening the recovery. But by 2020 they could be producing annual savings equal to more than 3% of GDP.

With the future debt under control, it would be fiscally responsible to enact permanent tax-rate reductions and an effective short-term program of infrastructure investment in things like bridges, airports and other projects that will boost demand. Each dollar spent on a well-designed infrastructure program would increase GDP by a dollar or more, unlike the 2009 "stimulus" program that spent its funds on transfer payments, temporary tax cuts and other programs that did little to raise total spending.

Lower personal tax rates would raise GDP by increasing incentives for additional earning and increased entrepreneurial activity. Bringing the U.S. corporate tax rate (35%) in line with the tax rates in other industrial countries (closer to 25%) would spur investment and production.

Continued in article

From the CFO Journal's Morning Ledger on September 19, 2013

The Fed is holding back on tapering and markets are cheering. Asia and Europe are soaring after the Dow closed at a record high yesterday and yields on 10-year Treasury notes dropped to 2.701%. And DJIA futures are pointing to a higher opening. Fed officials got cold feet after spending months signaling that they might begin to pare their $85 billion-a-month bond-buying program at the September policy meeting, the WSJ’s Jon Hilsenrath and Victoria McGrane write. At the end of their two-day meeting, they actually lowered their growth estimates for this year and next and expressed worry that the recent jump in long-term interest rates could squeeze an already-weak upturn. “The tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market,” the Fed said in a statement after the meeting. “The [Fed] decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.”

Fed Chairman Ben Bernanke also sounded the alarm on the potential economic damage that could result from looming brinksmanship in Washington. “A government shutdown, and perhaps even more so a failure to raise the debt limit, could have very serious consequences for the financial markets and for the economy,” Mr. Bernanke said in his press conference following the policy meeting.

Meanwhile, it’s looking more likely that President Obama will nominate Janet Yellen to take over from Mr. Bernanke. Two Democratic aides said Ms. Yellen’s name has come up in at least two of those conversations, and a White House official confirmed the Fed vice chairwoman is the front-runner for the post, the WSJ’s Damian Paletta and Peter Nicholas report.


Bob Jensen's threads on entitlements ---

How to Mislead in the Media
"It's a Cooked Book:  Global warmism and the antiscientific method," The Wall Street Journal, September 24, 2013 ---

In the first five paragraphs of a recent dispatch from Stockholm, the Associated Press--in our estimation unwittingly, for the most part--exposes the deep corruption of the "global warming" enterprise:

Scientists working on a landmark U.N. report on climate change are struggling to explain why global warming appears to have slowed down in the past 15 years even though greenhouse gas emissions keep rising.
Leaked documents obtained by The Associated Press show there are deep concerns among governments over how to address the issue ahead of next week's meeting of the Intergovernmental Panel on Climate Change.
Climate skeptics have used the lull in surface warming since 1998 to cast doubt on the scientific consensus that humans are cooking the planet by burning fossil fuels and cutting down CO2-absorbing forests.
The IPCC report is expected to affirm the human link with greater certainty than ever, but the panel is under pressure to also address the recent lower rate of warming, which scientists say is likely due to heat going deep into the ocean and natural climate fluctuations.
"I think to not address it would be a problem because then you basically have the denialists saying, 'Look the IPCC is silent on this issue,' " said Alden Meyer, of the Washington-based Union of Concerned Scientists.

The first paragraph describes a scientific problem: a theory that has been put to an empirical test and found wanting. In the fourth paragraph, we get a passing discussion of alternative hypotheses. But this is presented as fundamentally a problem of political communication or public relations.

And these guys look shifty not just for scientists but for PR men. Specialists in crisis management emphasize the importance of building (or rebuilding) public trust by being both honest and forthcoming. But look at that Meyer quote. He's not calling for forthrightness, just for some sort of statement so that critics--whom he disparages as "denialists"--can't say the IPCC "is silent."

The AP itself uses the term "climate skeptics," which is less pointed than "denialists" but is still problematic. The purported opposition between "skeptics" and adherents to "the scientific consensus" is nonsensical, for skepticism is at the very heart of the scientific method. When the data call a theory into question, a scientist revisits the theory. Instead, the panel is employing the antiscientific method: It "is expected to affirm" the theory "with greater certainty than ever."

And look how the AP sums up that theory: "that humans are cooking the planet by burning fossil fuels and cutting down CO2-absorbing forests." That's science fiction, not science. If Damon Knight were still with us, he might observe of the IPCC report: "It's a cooked book."

Meanwhile, a BBC story on the forthcoming report quotes this enthusiastic endorsement from Arthur Petersen, a Dutch climate scientist: "It is a major feat that we have been able to produce such a document which is such an adequate assessment of the science. That being said, it is virtually unreadable!"

And London's Daily Telegraph quotes Tony Blair, a former British prime minister, as saying in New York: "After this panel assessment this week, there will no longer be any serious doubt in the minds of serious people that this is a serious problem."

Manbearpig may be super serial, but the key Blair phrase is "serious people." Perhaps you recognize the logical fallacy. If not, here's a hint: Although Tony Blair was born in Edinburgh, his father was English and his mother was Irish.

Continued in article

Washington State is neither among the highest nor lowest states of the USA in terms of various definitions of poverty. The Washington Post, however, claims Washington State taxes poor people at a significantly higher level than all other states.

"The state that taxes the poor the most is… a blue one," by Niraj Choksh, The Washington Post, September 21, 2013 ---

The state that easily handed President Obama a victory last November while passing voter-approved referendums legalizing same-sex marriage and marijuana consumption also happens to have the nation’s highest tax burden on the poor.

Poor families in Washington state pay 16.9 percent of their total income in state and local taxes, more than any other state in the nation, according to a new report from the nonprofit Institute on Taxation and Economic Policy, which advocates for progressive tax policies.

Washington takes the top spot by a sizable lead. For the poor in Illinois, 13.8 percent of their income goes to paying state and local taxes. In Florida, those taxes eat up 13.3 percent of the income of the poor. The share in Hawaii is 13 percent, followed by Arizona at 12.9 percent.

Tax policy can do a lot of things—spur good economic activity and discourage the bad—but ITEP argues it can also be used to fight poverty.

“Any time when one in six americans are living in poverty it’s important to ask what our public policies can do to make that better,” says ITEP Executive Director Matt Gardner. “It’s important to remember that state tax codes can play a role in mitigating poverty as well.”

New Census data released on Thursday showed that while poverty rates showed no change in 43 states last year, they remained high. Even in the best-performing states, such as New Hampshire, Alaska and Maryland, a tenth of the population still lives in poverty. The rate was highest in Mississippi, where nearly a fourth of the state—24 percent—were living in poverty last year.

ITEP argues that states can implement and expand four simple, effective tax strategies to ease the tax burden on states’ poorest residents. Some 26 states have enacted a state Earned Income Tax Credit based on the federal version, which ITEP encourages states to expand or consider implementing. Eighteen states have “true” property tax “circuit breakers,” which are designed to offset the burden of property taxes that are high relative to income. Other targeted low-income credits and child-related credits would also reduce the burden on the poor, ITEP argues.

Continued in article

Jensen Comment
Oddly, Washington State is one of the seven states that do not have a state income tax:

Washington State ranks 37 to 42 in state poverty rankings depending upon the definition of poverty. See the 2008 Table 6 at
There are 50 states plus the District of Columbia which ranks 1-11 depending on the definition of poverty on a scale of 1-51. Mississippi ranks 1 with highest poverty under all definitions. New Hampshire ranks lowest with a 51 ranking under all definitions of poverty. Washington State is closest to Wisconsin and Nevada in this Table 6.

For states without income taxes the 2008 rankings are as follows under the various poverty definitions:

Thus Washington State is neither among the highest nor lowest states of the USA in terms of various definitions of poverty. The Washington Post, however, claims Washington State taxes poor people at a significantly higher level than all other states.

Seven States Slashing School Spending in 2013 --- Click Here

"Hedge Funder Stan Druckenmiller Wants Every Young Person In America To See These Charts About How They're Getting Screwed," by Julia La Roche, Business Insider, September 20, 2013 ---

 Iconic hedge fund manager Stanley Druckenmiller, the founder of Duquesne Capital Management, has been vocal for the past several months about the issue of generational theft. 

Druckenmiller, who accurately called the housing crisis, has said he sees another "storm" coming due to entitlement transfer payments. Entitlements are things like Social Security and Medicare that primary go to older, retired workers.

The billionaire fund manager believes that seniors in this country are essentially stealing from the young via these entitlement transfers. What's more is he thinks it could result in a crisis even more devastating than 2008.   

Druckenmiller, 60, will be visiting various college campuses this fall to talk about this issue with the younger population. We found a video of his presentation he gave at his alma mater Bowdoin College in Maine a few months ago.   

Druckenmiller told the Bowdoin students that he started worrying back in 1994. 

"The reason was because...it was demographics because I knew that in 2011 the 'Baby Boomers'...the front end was going to turn 65 and you were going to have this huge surge in entitlement payments because again the biggest buckets of entitlements are for the elderly." 

He also shared 16 charts with the students and explained why it's such a pressing matter that should be addressed now. We've included his charts and commentary in the slides that follow. 

Continued in article

The Slide Show --- Click Here

Bob Jensen's threads on entitlements ---

This Map Shows Whether Your City Is Booming Or Busting ---

Jensen Comment
The tax benefits of Texas, Washington State, and Indiana seem to be paying off. But the taxing monster California isn't doing so bad, proving that growth in GDP entails more than tax breaks. What in the world is going on in Iowa where taxes are also high?

One Reason the GDP in Iowa is Booming
Morgenson and Gebeloff (in The New York Times) expose the latest incarnation of the ethanol ripoff and the status of this government-created mess.
"Ethanol: Another Chapter in Scamnation," by David Kotok, Rithotz Blog, September 18, 2013 ---

So why does an IRS employee (Joe) want to work for the Big Four.

The Treasury Inspector General for Tax Administration (TIGTA) Stumbled on the the Another IRS Scandal

"TIGTA Finally Stumbles On The Real IRS Scandal," by Peter J. Reilly, Forbes, September 21, 2013 ---

. . .

Latest from TIGTA

I have to admit that I have not been very scandalized by most of it.  It is almost a relief that TIGTA is finally at least alluding to something that really is scandalous.  The latest report – Chief Counsel Should Take Steps to Minimize the Risk of Outside Influence on Its Letter Rulings - sounds pretty boring:

The audit was initiated to assess Chief Counsel’s policy to limit the number of letter ruling requests handled by its attorneys from the same taxpayer or practitioner.  Chief Counsel implemented this policy in order to address the taxpayers’ and practitioners’ reported strategy to increase their chances of obtaining expeditious and favorable letter rulings by having their requests handled by a preferred attorney.

Think about that.  There are people who have “preferred attorneys” at the Chief Counsel’s, that they want to steer their stuff to.  Why is that ?

Because of the fees associated with requesting a letter ruling (ranging from $2,000 to $18,000), associated attorney costs to prepare a letter ruling request (that can be as much as several hundred thousand dollars), and the potential tax impact of a favorable ruling, many practitioners view this strategy as a good business practice.

Apparently there is nothing surreptitious about the practice:

The basic strategy practitioners use to have their letter ruling requests assigned to a preferred attorney in Chief Counsel includes making direct, extended contact with an attorney whom they have a positive relationship, including scheduling a presubmission conference. If the Chief Counsel attorney indicates during the conference that a favorable ruling is likely, the practitioner will reference the preferred attorney in the letter ruling request for potential case assignment.

Is Anything Being Done ?

TIGTA found that there is almost no attempt to exercise any control over rulings being directed to particular attorneys.  One of the six offices has a two-thirds rule.  Attorneys are allowed to keep two-thirds of the ruling requests that are directed to them from a single firm.  TIGTA found that there were really no systems in place to enforce even this modest rule.  One of the offices explained why they could not even try to have a rule like that.

For example, one associate office’s main source of letter ruling requests is from the four largest accounting firms. As a result, management within this associate office believes a policy of limiting letter ruling assignments from the same source is impractical to implement.

So essentially, one of the six offices of the IRS Chief Counsel is a Big 4 outpost.  What is so scandalous about that ?

I have not had that much exposure to the most ethereal levels of tax practice.  I was on an AICPA national technical committee – Partnership Taxation – for a couple of years and I finished my career with seventeen undistinguished months in a not quite Big 4 firm.  I’m pretty hard to shock, but twice I was shocked.

The So-So Citizens At The AICPA

On the national technical committee, we made recommendations to make things simpler and clearer.  All in all, we were behaving like good citizens.  I remember one time a particularly obscure question being discussed and one of the Big 4 guys on the committee saying “You know what.  We would be just as happy if that rule remained unclear.” This was in the early nineties, when the Big 4 was engineering what Jack Townsend  called a massive raid on the treasury“.  Towards the turn of the millennium, someone like Richard Egan of EMC rather than pay the federal government 20% on a capital gain would pay KPMG 3%.  It was all based on hyper-technical misinterpretations of partnership provisions, perhaps the very ones that my fellow committee member preferred remain unclear.

Your Once And Future Boss

I had been the ultimate partnership tax geek in my small part of the world for many years, so one of the great joys of working for the national firm was having somebody I could call up every once in a while to talk about 704(b) and 704(c) and the like.

One of those guys explained the other shocking thing to me.  When somebody at the chief counsel’s office, let’s call him Joe, thinks about going out on a limb on some sort of ruling,  he will tend to want to run it by his former boss, call her Mary.  Mary does not work for the IRS Chief Counsel anymore.  Mary works for Big4.  Big4 is where Joe wants to work in a couple of years.  So Joe is getting intellectual guidance from his once and future boss who now works for the other side.

Now thanks to TIGTA, we learn that Mary can with relative ease route her ruling requests to Joe or, if she knows that Joe is too smart and not inclined to play ball, to somebody else.

Why Does Joe Want To Work For Big 4 ?

Recently there was a list released of the 1,000 top paid federal employees.  Number 1,000 was Elizabeth Salini who works for the SEC at a salary of $216,345.  Nobody on the list worked for IRS. In the regional firm where I worked we had a term for partners who made the kind of money Ms. Salini made.  We were called the bottom quartile.

Working for the IRS Joe gets a better work life balance and a defined benefit pension plan.  He also has ultimate bosses in Congress who give him contradictory instructions and constantly bad mouth him.  In Big 4, he has bosses who give him contradictory instructions and talk about how great he is.  If he becomes a partner his pension will be one Enron style debacle away from being obliterated. It still probably beats being a cowboy.

Continued in article

The IRS Scandal on Day 138 following the resignation of Lois Lerner

Jensen Comment
The public will probably never know what taxpayers paid to pay off Lois Lerner. She had it pretty good on paid leave all this time just to keep her mouth shut.

Bob Jensen's Fraud Updates --- http://www.trinity.edu/rjensen/FraudUpdates.htm

"Here's the Good News About Fracking," by Bryant Urstadt. Bloomberg Businessweek, September 17. 2013 ---

It’s hard to do a dance about methane leakage numbers, but anyone worried about global warming should.

The University of Texas on Tuesday morning released the results of a study suggesting that the amount of methane that escapes during the drilling of a natural gas well is about 1 percent, much less than the government—and across-the-board opponents of fracking—had previously thought. Methane is the main component of natural gas. When burned in an engine, it is a relatively clean source of energy. When released unburned, it is thought to be as powerful a greenhouse gas as any fossil fuel. Keeping it underground while drilling for it is supremely important. This study suggests that this is possible.

The study (PDF) was sponsored by oil companies and environmental groups, including the Environmental Defense Fund. One may naturally be suspicious of any study that includes participation by an economically interested group; energy companies provided access to some 500 wells during the study. But this one is peer-reviewed and appears credible.

One can be suspicious of environmental groups, too. The EDF’s spokesman, Eric Pooley, worked at Bloomberg Businessweek for a time. Two years ago, when he last visited, he was asked if natural gas might not provide a solution, and he responded that the supply chain leakage of methane negated any beneficial effects of clean-burning gas. So this may represent a change of perspective from the environmental lobby as well. “It’s not a magic bullet,” Pooley said when reached this morning. “It doesn’t get us all the way we want to go, but it is good news.”

The rest of the pipeline chain includes pipes and valves and holding tanks that exist throughout the world. Oil companies, occasionally suspected of not working in the public interest, have every reason to want to stop the leakage of methane at the wellhead and along the way to any engine that uses it. Gas escaping into the sky, after all, is money.

Today’s news suggests that, although we are still at grave risk of warming the planet, we are making progress. It would have been hard to say this even five years ago.


From the CFO Journal's Morning Ledger on September 18, 2013

Bloomberg’s Lisa Abramowicz notes that America’s companies are saving about $700 billion in interest payments thanks to the Fed’s stimulus.
 Corporate-bond yields over the past four years have fallen to an average of 4.6% from 6.14% in the five years before Lehman Brothers’ demise, a savings equal to $15.4 million annually for every $1 billion borrowed. “The stimulus was a huge saving grace in the economy overall,” Kroger Chief Financial Officer J. Michael Schlotman tells Abramowicz. His company estimates it’s paying about $80 million less in interest than it would have before the crisis. “It probably kept some businesses from failing because they were able to refinance their debt at lower interest payments.”

Jensen Comment
This doesn't count the hundreds of millions of dollars of savings that were consumed because people who wanted safe investment returns could only get less than 1% per annum from CDs and other safe investments. Retirees were forced to consume savings to pay their bills.

Paul Krugman and Ben Bernanke don't much care about losses in interest income for people who save. Their concern is to distribute more funding to people who don't save --- we're becoming a nation that assumes the government will always care for us.

GAO Report
"Social Security Overpays $1.3 Billion in Benefits," by Joel Seidman, CNBC, September 13, 2013 ---

An upcoming GAO report obtained by NBC News says the federal government may have paid $1.29 billion in Social Security disability benefits to 36,000 people who had too much income from work to qualify.

At least one recipient collected a potential overpayment of $90,000 without being caught by the Social Security Administration, according to the report, which will be released Sunday, while others collected $57,000 and $74,000.

The GAO also said its estimate of "potentially improper" payments, which was based on comparing federal wage data to Disability Insurance rolls between 2010 and 2013, "likely understated" the scope of the problem, but that an exact number could not be determined without case by case investigations.

More from NBC News:
Protecting social security for the next generation
Is now the worst time to retire? Not even close
Obama's fix would trim Social Security checks

To qualify for disability, recipients must show that they have a physical or mental impairment that prevents gainful employment and is either terminal or expected to last more than a year. Once approved, the average monthly payment to a recipient is just under $1,000.

(Read more: Social Security Benefits—10 Things You Must Know)

There is a five-month waiting period during which monthly income cannot exceed $1,000 before an applicant can qualify for disability, as well as a nine-month trial period during which someone who is already receiving benefits can return to work without terminating his or her disability payments.


The GAO said that its analysis showed that about 36,000 individuals either earned too much during the waiting period or kept collecting too long after their nine-month trial period had expired. The report recommended that "to the extent that it is cost-effective and feasible," the Social Security Administration's enforcement operation should step up efforts to detect earnings during the waiting period.

(Read more: How to maximize your social security benefit)

In fiscal 2011, more than 10 million Americans received disability benefits totaling more than $128 billion. The GAO's report estimates that less than half of one percent of recipients might be receiving improper payments.

A spokesperson for the Social Security Administration said the agency had a "more than 99 percent accuracy rate" for paying disability benefits. "While our paymen taccuracy rates are very high, we recognize that even small payment errors cost taxpayers. We are planning to do an investigation and we will recoup any improper payments from beneficiaries."

(Read more: Medicare will be exhausted in 2026)

"It is too soon to tell what caused these overpayments," said the spokesperson, "but if we determine that fraud is involved, we will refer these cases to our Office of the Inspector General for investigation."

Bob Jensen's threads on the sad state of governmental accounting and auditing ---

"Vladimir Putin Writes Intense New York Times Op-Ed — Calls Out American Exceptionalism, by Joe Weisenthall, Business Insider, September 11, 2013 ---

Is it ethical for a (TCU) professor to hold help sessions restricted to students of color in his class?
"'Students of Color Only'," by Colleen Flaherty, Inside Higher Ed, September 16, 2013 ---

It's unclear whether non-Hispanic minority students also were invited to the study session in a separate e-mail.

The student said she wondered what her friends would think, and posted it on Facebook, with the tag: “I straight up just got segregated by my own teacher. I'm 75 [percent] white.”

One friend said: "Wait is this a joke? Your professor is trying to have a study session for 'students of color' only?"

Another friend in the class wrote: "I did not get an email like that!!!!"

Another said: "Not trying to start anything, but if this had been an email saying he likes to meet with all the white students at the beginning of the semester, and then ended the email the way he did, but with WHITE STUDENTS ONLY, I guarantee you this would be all over the news in seconds."

Yet another wrote: "But what if ur Hispanic yet u have a white sounding last name. U get left out?"

The student responded: "yeah that's kind of my point. he just judged me by my last name."

. . .

“I thought, ‘Is this really happening?’” the student said. “I laughed, in shock, as my immediate reaction.”

The student said she doesn’t strongly identify as Hispanic, although her last name is of Hispanic origin and she is one-quarter Hispanic. She wondered how – so early in the year – the professor had found a group of students to approach, other than by selecting Hispanic-sounding names from the class roster. She said she also wondered, and doubted, whether her fellow "Understanding Religion: Society and Culture” students without last names of Hispanic origins had received the same offer.

That student said she liked the class and enjoyed Piñon’s teaching, but that his offer seemed unfair. She noted a visit she'd made to a Fort Worth Library exhibit on 20th-century agricultural labor activist César Chávez for Piñon’s class, which focuses on Latin American religions. "I was reading about how he was segregated because he was a Mexican, and that's what [the professor's] doing to the rest of us, in a way. I mean, it's special attention and favoring them."

It's unclear whether non-Hispanic minority students also were invited to the study session in a separate e-mail.

The student said she wondered what her friends would think, and posted it on Facebook, with the tag: “I straight up just got segregated by my own teacher. I'm 75 [percent] white.”

One friend said: "Wait is this a joke? Your professor is trying to have a study session for 'students of color' only?"

Another friend in the class wrote: "I did not get an email like that!!!!"

Another said: "Not trying to start anything, but if this had been an email saying he likes to meet with all the white students at the beginning of the semester, and then ended the email the way he did, but with WHITE STUDENTS ONLY, I guarantee you this would be all over the news in seconds."

Yet another wrote: "But what if ur Hispanic yet u have a white sounding last name. U get left out?"

The student responded: "yeah that's kind of my point. he just judged me by my last name."

Continued in article

"How Detroit went broke: The answers may surprise you - and don't blame Coleman Young," by Nathan Bomey and John Gallagher/Detroit Free Press Business Writers, Detroit Free Press, September 15, 2013 ---

. . .

For this report, the Free Press examined about 10,000 pages of documents gathering dust in the public library’s archives. Since most of those documents have never been digitized, the Free Press created its own database of 50 years of Detroit’s financial history. Reporters also conducted dozens of interviews with participants from the last six mayoral administrations as well as city bureaucrats and outside experts. Among the highlights from the review:


Taxing higher and higher: City leaders tried repeatedly to reverse sliding revenue through new taxes. Despite a new income tax in 1962, a new utility tax in 1971 and a new casino revenue tax in 1999 — not to mention several tax increases along the way — revenue in today’s dollars fell 40% from 1962 to 2012. Higher taxes helped drive residents to the suburbs and drove away business. Today, Detroit still doesn’t take in as much tax revenue as it did just from property taxes in 1963.



Reconsidering Coleman Young: Serving from 1974-1994, Young was the most austere Detroit mayor since World War II, reducing the workforce, department budgets and debt during a particularly nasty national recession in the early 1980s. Young was the only Detroit mayor since 1950 to preside over a city with more income than debt, although he relied heavily on tax increases to pay for services.


Downsizing — too little, too late: The total assessed value of Detroit property — a good gauge of the city’s tax base and its ability to pay bills — fell a staggering 77% over the past 50 years in today’s dollars. But through 2004, the city cut only 28% of its workers, even though the money to pay them was drying up. Not until the last decade did Detroit, in desperation, cut half its workforce. The city also failed to take advantage of efficiencies, such as new technology, that enabled enormous productivity gains in the broader economy.

Skyrocketing employee benefits: City leaders allowed legacy costs — the tab for retiree pensions and health care — to spiral out of control even as the State of Michigan and private industry were pushing workers into less costly plans. That placed major stress on the budget and diverted money from services such as streetlights and public safety. Detroit’s spending on retiree health care soared 46% from 2000 to 2012, even as its general fund revenue fell 20%.


Gifting a billion in bonuses: Pension officials handed out about $1 billion in bonuses from the city’s two pension funds to retirees and active city workers from 1985 to 2008. That money — mostly in the form of so-called 13th checks — could have shored up the funds and possibly prevented the city from filing for bankruptcy. If that money had been saved, it would have been worth more than $1.9 billion today to the city and pension funds, by one expert’s estimate.


Missing chance after chance: Contrary to myth, the city has not been in free fall since the 1960s. There have been periods of economic growth and hope, such as in the 1990s when the population decline slowed, income-tax revenue increased and city leaders balanced the budget. But leaders failed to take advantage of those moments of calm to reform city government, reduce expenses and protect the city and its residents from another downturn.


Borrowing more and more: Detroit went on a binge starting around 2000 to close budget holes and to build infrastructure, more than doubling debt to $8 billion by 2012. Under Archer, Detroit sold water and sewer bonds. Kilpatrick, who took office in 2002, used borrowing as his stock answer to budget issues, and Bing borrowed more than $250 million.


Adding the last straw — Kilpatrick’s gamble: He’s best known around the globe for a sex and perjury scandal that sent him to jail and massive corruption that threatens to send him to prison next month for more than 20 years. The corruption cases further eroded Detroit’s image and distracted the city from its fiscal storm. But perhaps the greatest damage Kilpatrick did to the city’s long-term stability was with Wall Street’s help when he borrowed $1.44 billion in a flashy high-finance deal to restructure pension fund debt. That deal, which could cost $2.8 billion over the next 22 years, now represents nearly one-fifth of the city’s debt.

With all the lost opportunities over decades, with Detroit’s debt mounting, with the housing crash and Great Recession just over the horizon, 2005 turned out to be the watershed year.

Although no one could see it at the time, Detroit’s insolvency was guaranteed.


Continued in article

Detroit made extra pension payments that were not required, and these were major factors driving Detroit into bankruptcy ---
http://usnews.nbcnews.com/_news/2013/09/25/20697344-detroit-pension-fund-made-billions-in-extra-payments-helping-push-city-into-bankruptcy?lite \

"Undisclosed Pension Extras Cost Detroit Billions," by Mary Williams Walsch, The New York Times, September 25, 2013 ---

Detroit’s municipal pension fund made undisclosed payments for decades to retirees, active workers and others above and beyond normal benefits, costing the struggling city billions of dollars, according to an outside actuary hired to examine the payments.

The payments included bonuses to retirees, supplements to workers not yet retired and cash to the families of workers who died too young to get a pension, according to a report by the outside actuary and other sources.

How much each person received is not known because payments were not disclosed in the annual reports of the fund.

Detroit has nearly 12,000 retired general workers, who last year received pensions of $19,213 a year on average — hardly enough to drive a great American city into bankruptcy. But the total excess payments in some years ran to more than $100 million, a crushing expense for a city in steep decline. In some years, the outside actuary found, Detroit poured more than twice the amount into the pension fund that it would have had to contribute had it only paid the specified pension benefits.

And even then, the city’s contributions were not enough. So much money had been drained from the pension fund that by 2005, Detroit could no longer replenish it from its dwindling tax revenues. Instead, the city turned to the public bond markets, borrowed $1.44 billion and used that to fill the hole.

Even that didn’t work. Last June, Detroit failed to make a $39.7 million interest payment on that borrowing — the first default of what was soon to become the biggest municipal bankruptcy case in American history.

Detroit said that making the interest payment would have consumed more than 90 percent of its available cash. And besides, the hole in its pension fund was growing again, and it needed yet another $200 million for that.

When Detroit turned to the bond market in 2005, it acknowledged that it needed cash for its pension fund but did not explain its long history of paying out more than the plan’s legitimate benefits, including the bonuses, known as “13th checks,” which were reported earlier this month by The Detroit Free Press. Nor did the city describe the pension fund’s distributions to active workers, or that a 1998 shift to a 401(k)-style plan had been blocked and turned instead into a death benefit. In its most recent annual valuation of the fund, the plan’s actuary said it was still trying to determine the “effect of future retroactive transfers to the 1998 defined contribution plan,” without mentioning that it had not been carried out.

All of these things eroded the financial health of the pension system, but neither the magnitude of the harm, nor its effect on the city’s own finances, were disclosed to investors. German banks were big buyers of Detroit’s pension debt; now, they are complaining that they were told it was sovereign debt.

Finally, in 2011, the city hired the outside actuary to get a handle on where all the money was going. The pension system’s regular actuaries, with the firm of Gabriel Roeder Smith, would not provide the information because they worked for the plan trustees, not the city.

The outside actuary, Joseph Esuchanko, concluded that the various nonpension payments had cost the struggling city nearly $2 billion from 1985 to 2008 because the city had to constantly replenish the money, with interest. The trustees began making the payments even before 1985, but it appears that Mr. Esuchanko could not get data for earlier years.

His calculations included only the extra payments by Detroit’s pension fund for general workers. Detroit has a second pension fund, for police officers and firefighters, which also made excess payments in the past. But Mr. Esuchanko could not get the data he needed to calculate those, either.

When Mr. Esuchanko reported his findings, Detroit’s city council voted to halt all payments except legitimate pensions, as described in plan documents. The police and firefighters’ plan trustees appear to have discontinued the practice earlier.

Detroit’s pension trustees, and their lawyers, were unavailable on Wednesday to comment on the extra payments.

Joseph Harris, who served as Detroit’s independent auditor general from 1995 to 2005, said the payments were approved by the pension board of trustees, and it would have been useless for the city to have tried to stop them during his term.

“It was like dandelions,” he said. “You just accept them. They were there, something you’ve seen all your life.”

Continued in article

Bob Jensen's threads on the sad state of pension accounting ---

Bob Jensen's threads on the sad state of governmental accounting ---

Bob Jensen's Fraud Updates ---

"Banks find appalling new way to cheat homeowners," by David Dayen, Salon, September 24, 2013 ---

A few months ago, Ceith and Louise Sinclair of Altadena, California, were told that their home had been sold. It was the first time they’d heard that it was for sale.

Their mortgage servicer, Nationstar, foreclosed on them without their knowledge, and sold the house to an investment company. If it wasn’t for the Sinclairs going to a local ABC affiliate and describing their horror story, they would have been thrown out on the street, despite never missing a mortgage payment. It’s impossible to know how many homeowners who didn’t get the media to pick up their tale have dealt with a similar catastrophe, and eventually lost their home.

Continued in article

Bob Jensen's threads on "Rotten to the Core" ---

"Why We Didn’t Learn Enough From the Financial Crisis," by Justin Fox, Harvard Business Review Blog, September 13, 2013 --- Click Here

“Liquidate labor, liquidate stocks, liquidate real estate,” Treasury Secretary Andrew Mellon may or may not have told Herbert Hoover in the early years of the Great Depression. “It will purge the rottenness out of of the system.” This is what has since become known as the “Austrian” view (although most of its modern proselytizers are American): economic actors need to learn from their mistakes, malinvestmentmust be punished, busts are needed to wring out the excesses created during boom times.

Within the economic mainstream, there is some sympathy for the idea that crisis interventions can create “moral hazard” by bailing out the irresponsible. But the argument that financial crises should be allowed to wreak their havoc unchecked has few if any adherents. As Milton Friedman put it in 1998:

I think the Austrian business-cycle theory has done the world a great deal of harm. If you go back to the 1930s, … you had the Austrians sitting in London, Hayek and Lionel Robbins, and saying you just have to let the bottom drop out of the world. You’ve just got to let it cure itself. You can’t do anything about it. You will only make it worse. You have Rothbard saying it was a great mistake not to let the whole banking system collapse. I think by encouraging that kind of do-nothing policy both in Britain and in the United States, they did harm.

When a financial crisis hit in 2008 that was probably worse than anything the world had seen since the early 1930s, it was this mainstream view that won out. The bailout of the big banks in late 2008, while hugely unpopular with the general populace, has garnered near-unanimous support from the economics profession. In a paper eventually published in the Journal of Financial Economics in 2010, the University of Chicago’s Pietro Veronesi and Luigi Zingales — two economists who aren’t generally big fans of government economic intervention — concluded that even without including the impossible-to-measure systemic benefits, the cash infusions and guarantees orchestrated by Treasury Secretary Hank Paulson created between $73 billion and $91 billion in economic value after costs.

The Federal Reserve’s subsequent (and continuing) support of asset markets has been somewhat more controversial, but still meets widespread approval among economists. More controversial yet have been fiscal stimulus efforts like the American Recovery and Reinvestment Act of 2009, but the tide of economic opinion and evidence seems to have turned in their favor too, with the bulk of post-stimulus empirical studies showing a positive effect and the former austerity advocates at the International Monetary Fund dramatically changing their tune starting late last year.

In sum, the economic mainstream got its way, the Austrians didn’t, and we all appear to be better off for it. It has been a tough five years, but not nearly as tough as the early 1930s. And the biggest economic policy mistake made was probably not the bailouts or the deficit spending or the printing of money, but the failure to stop Lehman Brothers from failing on Sept. 15, 2008.

Yet despite this record of relative success, most the commentaries being published in the lead-up to the fifth anniversary of that fateful day seem to focus instead on the opportunities missed. Princeton economist Alan Blinder’s op-ed piece in the Wall Street Journal is a prime example of this. Blinder laments that the dangerous financial-sector practices that precipitated the crisis have mostly been left in place. Contrasting the tepid regulatory measures taken since 2008 with the remaking of the financial system that took place during and after the Great Depression, he writes:

Far from being tamed, the financial beast has gotten its mojo back — and is winning. The people have forgotten — and are losing.

What Blinder and his kindred spirits (and I should add that I am one of them) generally fail to discuss, though, is that one of the main reasons the people have forgotten is because economic policy-makers succeeded in averting anything quite as memorable as the wave after wave of bank failures and widespread economic misery that swept the U.S. in the early 1930s. By giving us a Great Recession in place of a Great Depression, they made it much harder to assemble a political consensus for truly dramatic change.

Continued in article

"We’re All Still Hostages to the Big Banks," by Anat R. Admati, The New York Times, August 25, 2013 --- Click Here

NEARLY five years after the bankruptcy of Lehman Brothers touched off a global financial crisis, we are no safer. Huge, complex and opaque banks continue to take enormous risks that endanger the economy. From Washington to Berlin, banking lobbyists have blocked essential reforms at every turn. Their efforts at obfuscation and influence-buying are no surprise. What’s shameful is how easily our leaders have caved in, and how quickly the lessons of the crisis have been forgotten.

We will never have a safe and healthy global financial system until banks are forced to rely much more on money from their owners and shareholders to finance their loans and investments. Forget all the jargon, and just focus on this simple rule.

Mindful, perhaps, of the coming five-year anniversary, regulators have recently taken some actions along these lines. In June, a committee of global banking regulators based in Basel, Switzerland, proposed changes to how banks calculate their leverage ratios, a measure of how much borrowed money they can use to conduct their business.

Last month, federal regulators proposed going somewhat beyond the internationally agreed minimum known as Basel III, which is being phased in. Last Monday, President Obama scolded regulators for dragging their feet on implementing Dodd-Frank, the gargantuan 2010 law that was supposed to prevent another crisis but in fact punted on most of the tough decisions.

Don’t let the flurry of activity confuse you. The regulations being proposed offer little to celebrate.

From Wall Street to the City of London comes the same wailing: requiring banks to rely less on borrowing will hurt their ability to lend to companies and individuals. These bankers falsely imply that capital (unborrowed money) is idle cash set aside in a vault. In fact, they want to keep placing new bets at the poker table — while putting taxpayers at risk.

When we deposit money in a bank, we are making a loan. JPMorgan Chase, America’s largest bank, had $2.4 trillion in assets as of June 30, and debts of $2.2 trillion: $1.2 trillion in deposits and $1 trillion in other debt (owed to money market funds, other banks, bondholders and the like). It was notable for surviving the crisis, but no bank that is so heavily indebted can be considered truly safe.

The six largest American banks — the others are Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley — collectively owe about $8.7 trillion. Only a fraction of this is used to make loans. JPMorgan Chase used some excess deposits to trade complex derivatives in London — losing more than $6 billion last year in a notoriously bad bet.

Risk, taken properly, is essential for innovation and growth. But outside of banking, healthy corporations rarely carry debts totaling more than 70 percent of their assets. Many thriving corporations borrow very little.

Banks, by contrast, routinely have liabilities in excess of 90 percent of their assets. JPMorgan Chase’s $2.2 trillion in debt represented some 91 percent of its $2.4 trillion in assets. (Under accounting conventions used in Europe, the figure would be around 94 percent.)

Basel III would permit banks to borrow up to 97 percent of their assets. The proposed regulations in the United States — which Wall Street is fighting — would still allow even the largest bank holding companies to borrow up to 95 percent (though how to measure bank assets is often a matter of debate).

If equity (the bank’s own money) is only 5 percent of assets, even a tiny loss of 2 percent of its assets could prompt, in essence, a run on the bank. Creditors may refuse to renew their loans, causing the bank to stop lending or to sell assets in a hurry. If too many banks are distressed at once, a systemic crisis results.

Prudent banks would not lend to borrowers like themselves unless the risks were borne by someone else. But insured depositors, and creditors who expect to be paid by authorities if not by the bank, agree to lend to banks at attractive terms, allowing them to enjoy the upside of risks while others — you, the taxpayer — share the downside.

Implicit guarantees of government support perversely encouraged banks to borrow, take risk and become “too big to fail.” Recent scandals — JPMorgan’s $6 billion London trading loss, an HSBC money laundering scandal that resulted in a $1.9 billion settlement, and inappropriate sales of credit-card protection insurance that resulted, on Thursday, in a $2 billion settlement by British banks — suggest that the largest banks are also too big to manage, control and regulate.

NOTHING suggests that banks couldn’t do what they do if they financed, for example, 30 percent of their assets with equity (unborrowed funds) — a level considered perfectly normal, or even low, for healthy corporations. Yet this simple idea is considered radical, even heretical, in the hermetic bubble of banking.

Bankers and regulators want us to believe that the banks’ high levels of borrowing are acceptable because banks are good at managing their risks and regulators know how to measure them. The failures of both were manifest in 2008, and yet regulators have ignored the lessons.

If banks could absorb much more of their losses, regulators would need to worry less about risk measurements, because banks would have better incentives to manage their risks and make appropriate investment decisions. That’s why raising equity requirements substantially is the single best step for making banking safer and healthier.

The transition to a better system could be managed quickly. Companies commonly rely on their profits to grow and invest, without needing to borrow. Banks should do the same.

Banks can also sell more shares to become stronger. If a bank cannot persuade investors to buy its shares at any price because its assets are too opaque, unsteady or overvalued, it fails a basic “stress test,” suggesting it may be too weak without subsidies.

Ben S. Bernanke, chairman of the Federal Reserve, has acknowledged that the “too big to fail” problem has not been solved, but the Fed counterproductively allows most large banks to make payouts to their shareholders, repeating some of the Fed’s most obvious mistakes in the run-up to the crisis. Its stress tests fail to consider the collateral damage of banks’ distress. They are a charade.

Dodd-Frank was supposed to spell the end to all bailouts. It gave the Federal Deposit Insurance Corporation “resolution authority” to seize and “wind down” banks, a kind of orderly liquidation — no more panics. Don’t count on it. The F.D.I.C. does not have authority in the scores of nations where global banks operate, and even the mere possibility that banks would go into this untested “resolution authority” would be disruptive to the markets.

The state of financial reform is grim in most other nations.

Continued in article

Greatest Swindle in the History of the World ---

Bob Jensen's threads on the "Financial Crisis" and its bailout ---

From the CPA Newsletter on September 16, 2013

FATCA leads many banks to jettison U.S. clients ---
The Foreign Account Tax Compliance Act, which goes into effect next year, is leading many foreign banks to jettison their U.S. customers to avoid having to comply with the law's complex requirements. Compliance is expected to cost institutions millions of dollars a year. Americans overseas are getting locked out of basic financial services. CNNMoney (9/15)

"Everywhere I Look I See Jobs That Will Be Replaced By Robots," by Richard White, Business Insider, September 12, 2013 ---

Unemployment of 11.3% of workers seeking work
"Where Did 6 Million Missing Workers Go?" by Rick Newman, Yahoo Finance, September 13, 2013 ---

Opinions vary, but the New Yorker estimates the unemployment rate at about 11% if not for the dropouts:
"In August, 2008, just before Lehman Brothers blew up, the participation rate was 66.1 per cent. Five years later, it’s still almost three percentage points lower than it was then.
Assuming the participation rate stayed constant over the past five years, ...A bit of grade-school arithmetic provides the answer. In August, 2008, the participation rate was 66.1 per cent. Applying that figure to a working-age population that has grown by about ten million in the past five years, there would be about 162.6 million people in the labor force, rather than the actual figure of 155.5 million. With 144.2 million Americans currently employed, 18.4 million would then be classified as unemployed. (The actual figure is 11.3 million.) And the unemployment rate would be roughly 11.3 per cent....


Barack Obama beat Mitt Romney in the 2012 elections 65,909,451 Obama to 60,932,176 Romney votes.
Among the 48 million people of food stamps, how many voted for Mitt Romney?
The GOP will never win without gaining half the food stamp votes.
Here Are The States With The Most To Lose From Republican Food Stamp Cuts ---

It would do wonders for farmers if we gave food stamps to the 99%. The GOP would do better with that platform.

If I were I left-wing activist I would protest this ridiculously-small minimum wage legislation in California.

$8 an hour to $9 next July and $10 by January 2016
"California Legislature approves raising minimum wage to $10 — the highest of any state," by Josh Richman and Mike Rosenberg, San Jose Mercury News, September 13, 2013 ---

In California the unemployment rates of young adults aged 16-24 is 20.2%
Young Invincibles
, August 22, 2013 ---

California Overall Unemployment Rate 1976-2011 ---

The amount of unemployment compensation in California is about average but the duration is as long as any other state (99 weeks) ---

Jensen Questions
With the high adult and youth unemployment rates in California is the minimum wage increase enough to reduce dependency on migrant workers from Latin America to pick California's vast crops?
The Federal government eliminated prices of fuel and food from inflation price adjustments. If we factor in the price of fuel and food in California is the $10 minimum wage even keeping up with California's price inflation?


Greece's Unemployment Nightmare Has Gotten Worse ---

ELSTAT, Greece's unemployment rate climbed to 27.9% in June from 27.6% in the month


Radical Thinkers: Five Videos Profile Max Horkheimer, Alain Badiou & Other Radical Theorists ---

Now We See Why She Hid Behind Amendment Five and Refused to Testify
"Lois Lerner's Own Words:  Emails undercut the official IRS story on political targeting," The Wall Street Journal, September 11, 2013 ---

Congress's investigation into the IRS targeting of conservatives has been continuing out of the Syria headlines, and it's turning up news. Emails unearthed by the House Ways and Means Committee between former Director of Exempt Organizations Lois Lerner and her staff raise doubts about IRS claims that the targeting wasn't politically motivated and that low-level employees in Cincinnati masterminded the operation.

In a February 2011 email, Ms. Lerner advised her staff—including then Exempt Organizations Technical Manager Michael Seto and then Rulings and Agreements director Holly Paz—that a Tea Party matter is "very dangerous," and is something "Counsel and [Lerner adviser] Judy Kindell need to be in on." Ms. Lerner adds, "Cincy should probably NOT have these cases."

That's a different tune than the IRS sang in May when former IRS Commissioner Steven Miller said the agency's overzealous enforcement was the work of two "rogue" employees in Cincinnati. When the story broke, Ms. Lerner suggested that her office had been unaware of the pattern of targeting until she read about it in the newspaper. "So it was pretty much we started seeing information in the press that raised questions for us, and we went back and took a look," she said in May.

Earlier this summer, IRS lawyer Carter Hull, who oversaw the review of many Tea Party cases and questionnaires, testified that his oversight began in April 2010. Tea party cases under review are "being supervised by Chip Hull at each step," Ms. Paz wrote to Ms. Lerner in a February 2011 email. "He reviews info from TPs, correspondence to TPs etc. No decisions are going out of Cincy until we go all the way through the process with the c3 and c4 cases here." TP stands for Tea Party, and she means 501(c)(3) and 501(c)(4) nonprofit groups.

The emails also put the targeting in the context of the media and Congressional drumbeat over the impact of conservative campaign spending on the 2012 elections. On July 10, 2012 then Lerner-adviser Sharon Light emailed Ms. Lerner a National Public Radio story on how outside money was making it hard for Democrats to hold their Senate majority.

The Democratic Senatorial Campaign Committee had complained to the Federal Election Commission that conservative groups like Crossroads GPS and Americans for Prosperity should be treated as political committees, rather than 501(c)(4)s, which are tax-exempt social welfare groups that do not have to disclose their donors.

"Perhaps the FEC will save the day," Ms. Lerner wrote back later that morning.

That response suggests Ms. Lerner's political leanings, and it also raises questions about Ms. Lerner's intentions in a separate email exchange she had when an FEC investigator inquired about the status of the conservative group the American Future Fund. The FEC and IRS don't have the authority to share that information under section 6103 of the Internal Revenue Code. But the bigger question is why did they want to? After the FEC inquiry, the American Future Fund also got a questionnaire from the IRS.

Ms. Lerner famously invoked her right against self-incrimination rather than testify under oath to Congress. The House Oversight and Government Reform Committee reported this summer that its investigation had found Ms. Lerner had sent official IRS documents to her personal email account, and many questions remain unanswered. Democrats want to pretend the IRS scandal is over, but Ms. Lerner's role deserves much more exposure.

Also see Lois Lerner's "Tall Tales" --- Click Here

"The IRS Scandal, Day 126," by Paul Caron, TaxProf Blog, September 12, 2013 ---
Watch the Video

Prior TaxProf Blog coverage:

"Celebrity Silence on Syria," by Brent Bozell, Townhall, September 13, 2013 ---

In the era of "warmonger" Republicans in the White House, the Toronto International Film Festival would have been fertile ground for bold, outspoken "dissent" from actors against war in the Middle East. Now with Obama on the brink of missile attacks in Syria, you would expect the same agitation, but this time coupled with a dash of betrayal.

Instead, the Hollywood Reporter found nothing there but an icy pile of "no comments" from more than a dozen celebs, including Susan Sarandon, Josh Brolin, Penn Jillette and Tim Robbins.

For divorced Sarandon and Robbins, left-wing rabble-rousing against the Pentagon was too reminiscent of "The Way We Were." It's the Obama era; the government now can do no wrong.

Meryl Streep skipped the Toronto swirl, so what might she have said? Push the replay button on her remarks about Bush and Iraq at a 2004 Kerry-Edwards fundraiser: "I wondered to myself during 'Shock and Awe,' I wondered which of the megaton bombs Jesus, our president's personal savior, would have personally dropped on the sleeping families of Baghdad?"

Not in your wildest dreams would this lady say that about this president. Since Obama's version of Christianity came from a preacher who thought we deserved 9/11 and yelled "God damn America," he's spared this kind of movie-star character assassination.

Ed Asner didn't mince words when he told the Hollywood Reporter that celebrities won't be mobilizing against any Obama wars: "A lot of people don't want to feel anti-black by being opposed to Obama." People in Tinseltown watch a little too much MSNBC.

Asner sounded very cynical. "It will be a done deal before Hollywood is mobilized. This country will either bomb the hell out of Syria or not before Hollywood gets off its ass." He doesn't even think clogging the town square in protest accomplishes anything any more: "We had a million people in the streets, for Christ's sake, protesting Iraq, which was about as illegal as you could find. Did it matter? Is George Bush being tried in the high courts of justice?"

The Left used to want the president and his national-security minions frog-marched to court and tried as war criminals. But with the Hope and Change President running the wars, even the "idealistic" folks in Hollywood are running for the tall grass.

Where is Sean Penn? Crickets. Where is the Sean Penn movie where he stars as the idealistic lefty like Joe Wilson who exposes the corruption of a war-mongering president? Silence.

The Valerie Plame Wilson scandal even caused "socially conscious" comedian Al Franken to joke to David Letterman in 2005 that as a result, "(Scooter) Libby and Karl Rove are going to be executed" and then joke that the country was close to executing a sitting president. Now the Minneapolis press reports, "Al Franken is way more hawkish on Syria than Michele Bachmann."

Some are still pretending Obama is the state senator opposing the "dumb wars". Barbra Streisand tried to support both Obama and "peace" by reprinting leftist Katrina Vanden Heuvel on her website: "President Obama has sensibly pushed to bring the wars in Iraq and Afghanistan to an end." Earth to Barbra and friend: Obama expanded the war in Afghanistan, and 73 percent of the American deaths there have occurred during his presidency.

But the desperation continued: Obama "has resisted those who wanted earlier intervention in the Syrian civil war. And now he may just need the American people and Congress to keep him from getting more deeply involved in a war that he knows will only further weaken the nation and hurt our interests and our values."

In other words, Obama was against it before he was for it. He just needs a nudge from the people to get back in touch with the American people's liberal values.

Hollywood still has a few serious radicals, the ones who think all wars are cynical profiteering opportunities and Obama and Bush are both willing tools of the military-industrial complex. There's John Cusack, and Danny Glover, who's circulating a no-war petition. Michael Moore is attacking John Kerry on Twitter. But they are the outliers. The "mainstream" in the entertainment world sound like Robert DeNiro on CNN, "I know he'll make a decision and whatever decision he makes, I go with it." It sounds like that wonderful Second City comedy skit gone viral, with a group raising money for World War III called, "The Americans for Whatever Barack Obama Wants."

Continued in article

Aside from my hero Frank Partnoy, one of my favorite writers about Wall Street frauds is Michael Lewis. Aside from being experts on frauds they are extremely humorous writers. You can find a timeline of their books and articles and
CBS Sixty Minutes interviews at

"Michael Lewis on the Next Crisis," by Brad Wieners, Bloomberg Businessweek, September  9, 2013 ---

Was Lehman unjustly singled out when it was allowed to fail?
Lehman Brothers was the only one that experienced justice. They should’ve all been left to the mercy of the marketplace. I don’t feel, oh, how sad that Lehman went down. I feel, how sad that
Goldman Sachs (GS) and Morgan Stanley (MS) didn’t follow. I would’ve liked to have seen the crisis play itself out more. The problem is, we would’ve all paid the price. It’s a close call, but I think the long-term effects would’ve been better.

What surprised you most while reporting on the crisis?
The realization that it had actually paid for everyone to behave the way they behaved. Working on The Big Short, I first thought of it as this bet, and there were winners and losers on both sides of the bet. In one sense there was—but on Wall Street, even the losers got rich. So that was the thing I couldn’t get out of my head: that failure was so well-rewarded. It wasn’t that they’d been foolish and idiotic. They’d been incentivized to do disastrous things.

Henry Paulson, the man behind the bank bailouts, recently said, “The root cause of every financial crisis is flawed government policies.” Is that fair?
Some of the government’s policies have been idiotic. But the idea that the story begins and ends with government policy is insane. Wall Street, all by itself, orchestrated the crisis by a web of deceit that was breathtaking. If Wall Street continues to operate in that spirit, I would argue that there’s almost nothing the government can do to prevent them from doing bad things. Incentives are at the bottom of it all. At the gambling end of Wall Street, the people who are making decisions are making decisions not with their money, but with other people’s money, [so] they themselves are not personally responsible.

The other things at the bottom of it all are core to the human condition—optimism, gullibility, greed, panic. Is there any way, finally, to prevent people from behaving this way?
Yeah, what can you do? Well, you can lessen the reward for behaving this way. You can punish people more for behaving in this way. Part of this story is the story of a moral problem, and the moral problem grows out of the change in the structure of Wall Street. When there were partnerships and people’s money was on the line … they were encouraged to behave in ways that were to the long-term benefit of the organizations they belonged to. Long-term behavior is just much different from short-term behavior—it encourages a different morality. And for several decades on Wall Street, the short-term sensibility has been encouraged and compensated very highly. So what you’ve got is a culture that is all about that. Whether they say it or not, that’s sort of the water in which the fish swim. I think as a result you have, basically, total neglect of social responsibility.

Is this related to wealth inequity, the 1 Percent?
It isn’t because of what people are worth. It’s because their incentive system has changed, [which has] changed the values of people who were there. I think that’s a big problem. And the result is that people don’t trust the system. Why would you? The cost of the mistrust is hard to measure, but it’s big. If you’d asked me [in 2008], is the reform process going to play itself out the way that it has, I’d have said, No way—there’s going to be a more drastic change in the system. But there hasn’t been. I don’t know what it takes, what other crises would have to come down the pipe.

Has Silicon Valley replaced Wall Street as the place for bright young people to make their millions?
My sense is that even though the financial crisis has lessened the appeal of the big Wall Street firm, it’s still appealing to kids in school, for the simple reason that unlike Silicon Valley, where you do have to know something to break in, the barriers to entry on Wall Street are quite low once you have the [Ivy League] credentials. If you’re a certain kind of kid who doesn’t actually know anything about anything, Wall Street is still a great place to go.

Are you able to sleep easier now, or are things as tenuous as ever?
I’m in an emotionally complicated position: The worse it gets, the better it is for me. In a weird way, the worst thing that could happen is for the financial sector to figure out how to behave.

Continued in article


He's Never Been Modest:  The Self Promotions of Larry Summers
"Club Fed," by Maria Anastasia O'Grady, The Wall Street Journal, September 12. 2013 ---

It's no secret in Washington that former Treasury Secretary Larry Summers is lobbying in overdrive to be the next Federal Reserve chairman. As one 40-year veteran of Fed-watching put it to me, it's been so overt as to be "unseemly."

But Mr. Summer's self-promotion is more than undignified and immodest. It is also a major divergence from the longstanding tradition of keeping politics, as nearly as possible, out of the choice of a Fed chairman. In the past, campaigning for the top Fed post and enlisting surrogates to work Capitol Hill would automatically disqualify the subject. But instead, Mr. Summers seems to be gaining currency. (Pun intended.)

Of course, asking Mr. Summers not to put on the hard-sell for the job, when the Obama administration has invited it, would be like asking a dog not to dig for a bone. Princeton economist Alan Blinder, who is backing Fed vice chairman Janet Yellen in the contest, was asked on CNBC's Squawk Box on Wednesday whether he could recall any time in history when there had been "campaigns, vocal, public campaigns for who should be the chairman." Mr. Blinder said he could not, adding that "it is unfortunate" and "has led to a situation where people like myself and two or three hundred other economists" have "felt compelled to come out and take sides because it is like a campaign."

But economists are not the only ones campaigning. Many of Mr. Summers's backers are the same influential New York-Washington insiders who have made a living off of the symbiotic relationship between big government and the financial sector that brought the U.S. economy to its knees in 2008. Many remain close to the Obama administration or are even inside it.

In an Aug. 19 column for Bloomberg, former investment banker William D. Cohan referred to this cohort as "The Club." Inside the club, he wrote, are the likes of former Clinton Treasury Secretary Robert Rubin, Obama economic adviser Gene Sperling and Rubin "protege" Roger Altman, a former deputy treasury secretary and the founder of the Wall Street boutique Evercore Partners. "Almost all of Obama's top economic advisers are Rubin acolytes."

The Summers-Rubin "longtime friendship" is particularly noteworthy. It dates back to the 1980s, and according to Mr. Cohan "Rubin and Summers have been scratching each other's back ever since." In February 1999, Time magazine featured Mr. Summers, Mr. Rubin and Alan Greenspan on its cover as the "committee to save the world" for their interventions like the one to bail out large U.S. banks in Mexico in 1995.

Continued in article















From the CFO Journal's Morning Ledger on September 18, 2013

Walgreen is joining the ranks of big companies shaking up their health-care benefits. The drugstore chain today is expected to unveil a plan to provide payments to eligible employees for the subsidized purchase of insurance starting in 2014, the WSJ reports. The plan will affect roughly 160,000 employees, and will require them to shop for coverage on a private health-insurance marketplace.

It isn’t clear how much money the move might ultimately save Walgreen or whether its workers will face higher costs. Mark Englizian, Walgreen’s vice president of compensation and benefits, said the submitted bids for monthly premiums for the private exchanges were roughly equal to its current 2013 rates—meaning some savings could come from the fact the bids didn’t factor in year-over-year increases.

But it’s another example of how dramatically the insurance landscape is shifting ahead of the rollout of the Affordable Care Act. IBM and Time Warner are both planning to move thousands of retirees from their own company-administered plans to private exchanges. Sears and Darden Restaurants said last year they would send employees to a private exchange. And last month, UPS said it would end benefits for 15,000 employee spouses who are able to get coverage through their own employers. By 2017, nearly 20% of American workers could get their health insurance through a private exchange, according to Accenture Research. And a recent report by the National Business Group on Health said that 30% of large employers are considering moving active employees to exchanges by 2015, Reuters notes.


"Labor Unions: Obamacare Will 'Shatter' Our Health Benefits, Cause 'Nightmare Scenarios'," by Avik Roy, Forbes, July 15, 2013 ---

Labor unions are among the key institutions responsible for the passage of Obamacare. They spent tons of money electing Democrats to Congress in 2006 and 2008, and fought hard to push the health law through the legislature in 2009 and 2010. But now, unions are waking up to the fact that Obamacare is heavily disruptive to the health benefits of their members.

Last Thursday, representatives of three of the nation’s largest unions fired off a letter to Harry Reid and Nancy Pelosi, warning that Obamacare would “shatter not only our hard-earned health benefits, but destroy the foundation of the 40 hour work week that is the backbone of the American middle class.”

The letter was penned by James P. Hoffa, general president of the International Brotherhood of Teamsters; Joseph Hansen, international president of the United Food and Commercial Workers International Union; and Donald “D.” Taylor, president of UNITE-HERE, a union representing hotel, airport, food service, gaming, and textile workers.

“When you and the President sought our support for the Affordable Care Act,” they begin, “you pledged that if we liked the health plans we have now, we could keep them. Sadly, that promise is under threat…We have been strong supporters of the notion that all Americans should have access to quality, affordable health care. We have also been strong supporters of you. In campaign after campaign we have put boots on the ground, gone door-to-door to get out the vote, run phone banks and raised money to secure this vision. Now this vision has come back to haunt us.”

‘Unintended consequences’ causing ‘nightmare scenarios’

The union leaders are concerned that Obamacare’s employer mandate incentivizes smaller companies to shift their workers to part-time status, because employers are not required to provide health coverage to part-time workers. “We have a problem,” they write, and “you need to fix it.”

“The unintended consequences of the ACA are severe,” they continue. “Perverse incentives are causing nightmare scenarios. First, the law creates an incentive for employers to keep employees’ work hours below 30 hours a week. Numerous employers have begun to cut workers’ hours to avoid this obligation, and many of them are doing so openly. The impact is two-fold: fewer hours means less pay while also losing our current health benefits.”

What surprises me about this is that union leaders are pretty strategic when it comes to employee benefits. It was obvious in 2009 that Obamacare’s employer mandate would incentivize this shift. Why didn’t labor unions fight it back then?

Regulations will ‘destroy the very health and wellbeing of our members’

The labor bosses are also unhappy, because of the way Obamacare affects multi-employer health plans. Multi-employer plans, also called Taft-Hartley plans, are health insurance benefits typically arranged between a labor union in a particular industry, such as restaurants, and small employers in that industry. About 20 million workers are covered by these plans; 800,000 of Joseph Hansen’s 1.3 million UFCW members are covered this way.

Taft-Hartley plans, they write, “have been built over decades by working men and women,” but unlike plans offered on the ACA exchanges, unionized workers will not be eligible for subsidies, because workers with employer-sponsored coverage don’t qualify.

Obamacare’s regulatory changes to the small-group insurance market will drive up the cost of these plans. For example, the rules requiring plans to cover adult children up to the age of 26, the elimination of limits on annual or lifetime coverage, and the mandates that plans cover a wide range of benefits will drive premiums upward.

But the key problem is that the Taft-Hartley plans already provide generous and costly coverage; small employers now have a more financially attractive alternative, which is to drop coverage and put people on the exchanges, once the existing collective bargaining agreements are up. That gives workers less reason to join a union; a big part of why working people pay union dues is because unions play a big role in negotiating health benefits.

So the labor leaders are demanding that their workers with employer-sponsored coverage also gain eligibility for ACA subsidies. Otherwise, their workers will be “relegated to second-class status” despite being “taxed to pay for those subsidies,” a result that will “make non-profit plans like ours unsustainable” and “destroy the very health and wellbeing of our members along with millions of other hardworking Americans.”

‘The law as it stands will hurt millions of Americans’

The leaders conclude by stating that, “on behalf of the millions of working men and women we represent and the families they support, we can no longer stand silent in the face of elements of the Affordable Care Act that will destroy the very health and wellbeing of our members along with millions of other hardworking Americans.”

President Obama, of course, pledged that “if you like your plan, you can keep your plan.” But the labor leaders say that, “unless changes are made…that promise is hollow. We continue to stand behind real health care reform, but the law as it stands will hurt millions of Americans including the members of our respective unions. We are looking to you to make sure these changes are made.”

Continued in article

You're only poor if you choose to be
Dolly Parton in the song "Coat of Many Colors"

U.S. Census Report:  Only a small percentage of impoverished adults actually say it's because they can't find employment.
"Why The Poor Don't Work, According To The Poor," by Jordan Weissmann, The Atlantic, September 23, 2013 ---

Conservative Republicans have officially made it their mission to end food stamps as we know them. Such was evident last week, when the House GOP voted to cut the Supplemental Nutrition Assistance Program, as food stamps are now known, by $39 billion over a decade and begin bulking up its work requirements, along the lines of welfare reform in the 1990s. 

Whether you believe this a good or humane idea probably boils down to your take on a single question: why don't the poor, who make up the overwhelming majority of food stamp recipients (nearly 50 million of them), go to work? In 2012, more than 26 million 18-to-64-year-old adults lived under the poverty line; about 15 million of them didn't have a job during the year. Is the economy to blame? Or are personal choices at fault? 

If you're a liberal, your answer is probably pretty cut and dry, and these days likely involves the word "recession." But conservatives tend to take a different view. They argue that whereas unemployment among middle class families rises and falls with the health of the job market, poverty is shaped and fueled mostly by cultural forces, that the poor could work if they wanted, and that the safety net lulls them into indolence. One of their key data points on this front comes from the Census. Each year, the bureau asks jobless Americans why it is they've been out of work. And traditionally, a only a small percentage of impoverished adults actually say it's because they can't find employment, a point that New York University professor Lawrence Mead, one of the intellectual architects of welfare reform, made to Congress in recent testimony

In 2007, for instance, 6.4 percent of adults who lived under the poverty line and didn't work in the past year said it was because they couldn't find a job. As of 2012, it had more than doubled, leaving it at a still-small 13.5 percent. By comparison, more than a quarter said they stayed home for family reasons and more than 30 percent cited a disability. 

Continued in article

Jensen Comment
What the article overlooks is that millions of people who are described as "not working" really are working in the underground economy where cash wages are tax free (and benefits free) to maids, farm workers, construction workers, care providers, roofers, etc. ---

Eight Nations With the Most Immigrants --- Click Here

How the media ignores politically incorrect statistics

What Obama and the media won’t tell you about the crime rate ---

Every year, the FBI releases the national crime statistics for the whole country in the form of the Uniform Crime Report, which it did again last week. Not once has the president remarked on these numbers. Neither has New York City Mayor Michael R. Bloomberg. The liberal media pretend the statistics are written in invisible ink.

Why the blackout? Because all violent crime — including gun homicide — has gone down over the last 20 years. The gun murder rate has gone from 6.62 per 100,000 inhabitants in 1993 to 3.27 in 2012, a decline of more than 50 percent.

Americans are safer, but Mr. Obama told the grieving families of the Washington Navy Yard victims that we need to do something about “reducing the gun violence that unleashes so much mayhem on a regular basis.”


Patton: Guess Where Those Chemical Weapons (inside Syria) Came From ---

Sustainability Accounting
"Australia's water accounting system singled out:  But will today's liquid measures leave enough water for the future?" InTheBlack, September 12, 2013 ---

"Preventive health services with no deductible qualify as high-deductible health plans," by Sally P. Schreiber, Journal of Accountancy, September 10, 2013 ---

Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm

From the CFO Journal's Morning Ledger on September 19, 2013

Big insurers skip health exchanges
When the consumer marketplaces for insurance go live Oct. 1, don’t expect to see much of familiar names like Cigna or Aetna, writes the WSJ’s Timothy W. Martin. The
biggest health insurers are eschewing many of the exchanges out of concern that many of the individuals who will purchase coverage need it because they have chronic illnesses or other medical conditions that are expensive to treat. Their expected absence creates an opening for small regional players such as Molina Healthcare, Centene and Magellan Health Services to grab market share across multiple states in the rollout of the new federal health law.

Jensen Comment
Only one company will participate in West Virginia’s new individual health insurance marketplace.Media outlets report that Highmark Blue Cross Blue Shield and Carelink/Coventry applied and were accepted to participate in the individual marketplace. But Carelink/Coventry later decided to withdraw ---

It's becoming chaos in the labor market as Obamacare deadlines approach. I certainly do not advocate ending or defunding the Affordable Health Care Act. But some delays may be desirable in order to stop the epidemic of conversion of full-time workers to part-time workers and the epidemic of dropping employer health insurance coverage.
We should legislate greater penalties for companies and non-profit organizations who drop employee medical insurance coverage.
We should also legislate greater penalties for individuals who simply opt out of health insurance. This will become an epidemic leading to long lines for medical services at emergency rooms and inferior health care as more and more hospitals simply close their emergency rooms.

From the CFO Journal's Morning Ledger on September 26, 2013

Companies drop cheapest health plans. The U.S. arm of Sweden’s Securitas plans to discontinue its lowest-cost health plans and steer roughly 55,000 workers to new government-sponsored insurance exchanges for coverage next year, in the latest sign of the fraying ties between employment and health care, writes the WSJ’s Scott Thurm. Securitas is among more than 1,200 employers that offer the kind of bare-bones health plans that must be phased out beginning Jan. 1. Nearly four million people are enrolled in these so-called mini-med plans, which cap benefits to participants, sometimes at as little as $3,000 a year. Other big employers, including Darden Restaurants, Home Depot and Trader Joe’s will stop offering health insurance to part-time workers, and will direct those employees to the state exchanges. Darden, Home Depot and Trader Joe’s previously offered mini-meds to their part-timers.

From the CFO Journal's Morning Ledger on September 11, 2013

CFOs are relying more on part-time workers
That’s partly due to the looming rollout of the Affordable Care Act, but it’s also a reaction to lingering uncertainty about the economy,
according to the latest Duke University/CFO Global Business Outlook Survey. The third-quarter survey findings were pretty positive overall, though the U.S. Business Optimism Index edged down to 58 on a scale of zero to 100 after shooting above 60 in Q2. In a nutshell: Profits are expected to jump by more than 10%, capital spending is seen rising by nearly 5% and full-time employment is anticipated to increase by 2%. And 59% of CFOs say they’ve increased the proportion of their workforce made up of temporary and part-time workers or shifted toward outside advisers and consultants.

Among the companies making that shift, 38% say it’s due to health-care overhaul, while 44% say it’s down to extreme economic uncertainty. “Another trend that is affecting the growth in domestic employment is the hiring by U.S.-based companies of full-time employees in foreign countries,” says John Graham, professor of finance at Duke Fuqua School of Business and director of the survey. “More than one in four U.S. CFOs say their firms have hired full-time employees in other countries, and that number is expected to accelerate.” (Prof. Graham discusses the findings in this video.)


From the CFO Journal's Morning Ledger on September 4, 2013

A new approach to health-care benefits is gaining momentum ahead of the Affordable Care Act rollout. A growing number of employers plans to give workers a fixed sum of money and let them choose a plan from an online marketplace, the WSJ’s Anna Wilde Matthews reports.

More health-industry players are launching such private exchanges, which are separate from the government-operated marketplaces being created in each state. And insurers are creating their own versions. Aetna plans to launch a “proprietary” marketplace model next year. WellPoint already has one, and UnitedHealth Group‘s Optum health-services arm owns an exchange operator.

Sears Holdings and Darden Restaurants adopted this approach last year. The idea has been gaining the most traction among small and midsize employers, but interest is growing among companies of all sizes, Matthews writes. Bob Evans Farms, which owns about 560 restaurants and has about 34,000 employees including part-timers, will start directing workers to an exchange from Xerox's Buck unit that’s set to launch next January.

From the CFO Journal's Morning Ledger on August 22, 2013

Health-care law fuels part-time hiring
U.S. businesses are hiring, but three out of four of the nearly one million hires this year are part-time and many of the jobs are low-paid, writes Reuters’s Lucia Mutikani.
Executives at several staffing firms told Reuters that the Affordable Care Act, which requires employers with 50 or more full-time workers to provide health-care coverage, was a frequently cited factor in requests for part-time workers. A memo that leaked out from retailer Forever 21 last week showed it was reducing a number of full-time staff to positions where they will work no more than 29.5 hours a week, just under the law’s threshold. “They have put some of the full-time positions on hold and are hiring part-time employees so they won’t have to pay out the benefits,” said Client Staffing Solutions’ Darin Hovendick. “There is so much uncertainty. It’s really tough to design a budget when you don’t know the final cost involved.”


"Do we need a new law to prevent fraud in Obamacare?" by Steven Mintz, Ethics Sage, September 17, 2013 ---

Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm

"Prices Set for New Health-Care Exchanges Younger Buyers May Face Higher Insurance Premiums," by Louise Radnofsky, The Wall Street Journal, September 25, 2013 ---

U.S. officials for the first time disclosed insurance prices that will be offered through new federally run health-care exchanges starting Oct. 1, showing that young, healthy buyers likely will pay more than they do currently while older, sicker consumers should get a break.

The plans, offered under the health-care overhaul to people who don't get insurance through an employer or government program, in many cases provide broader coverage than current policies.

Costs will vary widely from state to state and for different types of consumers. Government subsidies will cut costs for some lower-income consumers.

Across the country, the average premium for a 27-year-old nonsmoker, regardless of gender, will start at $163 a month for the lowest-cost "bronze" plan; $203 for the "silver" plan, which provides more benefits than bronze; and $240 for the more-comprehensive "gold" plan.

But for some buyers, prices will rise from today's less-comprehensive policies. In Nashville, Tenn., a 27-year-old male nonsmoker could pay as little as $41 a month now for a bare-bones policy, but would pay $114 a month for the lowest-cost bronze option in the new federal health exchanges. More

Shutdown Unlikely to Hit Health Law's Rollout

Likewise, the least-expensive bronze policy would rise to $195 a month in Philadelphia for that same 27-year-old, from $73 today. In Cheyenne, Wyo., the lowest-cost option would be $271 a month, up from $82 today.

The Affordable Care Act marks a fundamental shift in the way insurers price their products. Carriers won't be allowed to charge higher premiums for consumers who have medical histories suggesting they might be more expensive to cover because they need more care. They will have to treat customers equally, with limited variation in premiums based on buyers' ages or whether they smoke.

Insurers also will have to offer a more generous benefits package that includes hospital care, preventive services, prescription drugs and maternity coverage.

For consumers used to skimpier plans—or young, healthy people who previously enjoyed attractive rates—that could mean significantly higher premiums.

The benefits are greater for people who previously were rejected for coverage because they were ill, or who were charged higher premiums. They are expected to find better coverage through the exchanges for the first time.

The concern for supporters of the law, and the administration, is whether enough healthy people sign up to balance the likely higher costs incurred by the sick and newly covered.

The data, which the administration was set to release Wednesday, cover 36 states where the federal government is operating insurance exchanges because state officials have declined to do so themselves. Fourteen states are operating exchanges on their own.

The Obama administration called the rates a good deal for consumers.

"The prices are affordable," said Gary Cohen, a top regulator at the Department of Health and Human Services.

"Because of the Affordable Care Act, the health insurance that people will be buying will actually cover them in the case of them getting sick. It doesn't make sense to compare just the number the person was paying, you have to compare the value people are getting," Mr. Cohen added.

Critics of the health law long have argued that the price changes represent a dramatic increase in premiums, and Senate Republicans repeated those arguments during a floor debate Tuesday.

"Obamacare hasn't even been fully implemented yet, but we can already see the train wreck headed our way. Premiums are skyrocketing," said Senate Minority Leader Mitch McConnell (R., Ky.).

Republicans are trying to repeal the law and have tied the issue to a bill to extend government funding beyond the Sept 30 end of the fiscal year. Sen. Ted Cruz (R., Texas) spoke on the Senate floor for hours into Tuesday night in what he said was a battle to block the law from taking effect.

Continued in article

From the CFO Journal's Morning Ledger on September 19, 2013

Big insurers skip health exchanges
When the consumer marketplaces for insurance go live Oct. 1, don’t expect to see much of familiar names like Cigna or Aetna, writes the WSJ’s Timothy W. Martin. The
biggest health insurers are eschewing many of the exchanges out of concern that many of the individuals who will purchase coverage need it because they have chronic illnesses or other medical conditions that are expensive to treat. Their expected absence creates an opening for small regional players such as Molina Healthcare, Centene and Magellan Health Services to grab market share across multiple states in the rollout of the new federal health law.


Jensen Comment
In my opinion we would be far better off if Congress had passed a national health insurance plan back in 2009 when the Democrats controlled the legislative and executive branches of Federal government. Instead we are left with a mess where the largest medical insurance companies are avoiding the state insurance exchanges. In some states there's almost no pricing competition such as in West Virginia where only one company offers the exchange insurance for individuals.

An enormous problem is that both profit and non-profit organizations, including government agencies, are dropping their employee medical insurance plans and/or are shifting more and more into use of part-time workers. Many like Walgreen will instead offer cash allowances to full-time employees and force all employees to shop for their own medical insurance. There will be differences what employees are charged in the various states. I don't know that Walgree and the other companies will make allowances for state pricing differentials.

Many young people benefit by being able to remain on the plans of their parents until age 26. High medical risk patients will have access that previously was denied or very high priced from insurance companies. Taxpayers will be paying for more poor people not eligible for Medicaid, although many states have resisted expanding their Medicaid roles.

Meanwhile the U.S. Congress will keep its free gold-plated medical insurance for lifetime coverage of current and former legislators. Too bad legislators can legislate the Affordable Health Care act without having to participate in that act.

Hopefully, health care in the USA will not be thrown entirely into chaos by failing to fund Obamacare at this late date. It would probably be best, however, if we could somehow adopt a national health care plan better than the one in Canada (which varies between provinces).

"Germany Is Exporting Its Grandmas (to Poland)," by Naomi, Kresge, Bloomberg Business Week, September 26, 2013 ---

Jensen Comment
Canada's approach to elderly grandmas who are only slightly impaired is to haul. at taxpayer expense, in portable Granny Cabins behind the homes of their children. When the time comes when Granny is no longer able to care for herself adequately in her Granny Cabin the cabin is hauled off for another grandma. I don't know if the same applies to a Grandpa Cabin, but I suspect the program is gender neutral. Usually grandpa kicks the bucket before grandma.

In the USA Medicare does not pay for nursing home care or Grandma Cabins. The only patients who get taxpayer-funded nursing home care are the very poor on Medicaid. Most nursing care in the USA is funded by family savings until the patients become so ill that hospitalization is required. A major Medicare expense is keeping terminally ill people alive in hospitals, often in intensive care units costing over $10,000 per day. No other nation spends as much keeping terminally ill patients artificially live on machines.

On November 22, 2009 CBS Sixty Minutes aired a video featuring experts (including physicians) explaining how the single largest drain on the Medicare insurance fund is keeping dying people hopelessly alive who could otherwise be allowed to die quicker and painlessly without artificially prolonging life on ICU machines.
"The Cost of Dying," CBS Sixty Minutes Video, November 22, 2009 ---

Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm


Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm

Bob Jensen's Tidbits Archives ---

Bob Jensen's Pictures and Stories

Summary of Major Accounting Scandals --- http://en.wikipedia.org/wiki/Accounting_scandals

Bob Jensen's threads on such scandals:

Bob Jensen's threads on audit firm litigation and negligence ---

Current and past editions of my newsletter called Fraud Updates ---

Enron --- http://www.trinity.edu/rjensen/FraudEnron.htm

Rotten to the Core --- http://www.trinity.edu/rjensen/FraudRotten.htm

American History of Fraud --- http://www.trinity.edu/rjensen/FraudAmericanHistory.htm

Bob Jensen's fraud conclusions ---

Bob Jensen's threads on auditor professionalism and independence are at

Bob Jensen's threads on corporate governance are at


Shielding Against Validity Challenges in Plato's Cave ---

·     With a Rejoinder from the 2010 Senior Editor of The Accounting Review (TAR), Steven J. Kachelmeier

·     With Replies in Appendix 4 to Professor Kachemeier by Professors Jagdish Gangolly and Paul Williams

·     With Added Conjectures in Appendix 1 as to Why the Profession of Accountancy Ignores TAR

·     With Suggestions in Appendix 2 for Incorporating Accounting Research into Undergraduate Accounting Courses

Shielding Against Validity Challenges in Plato's Cave  --- http://www.trinity.edu/rjensen/TheoryTAR.htm
By Bob Jensen

What went wrong in accounting/accountics research?  ---

The Sad State of Accountancy Doctoral Programs That Do Not Appeal to Most Accountants ---


Bob Jensen's threads on accounting theory ---

Tom Lehrer on Mathematical Models and Statistics ---

Systemic problems of accountancy (especially the vegetable nutrition paradox) that probably will never be solved ---

Bob Jensen's economic crisis messaging http://www.trinity.edu/rjensen/2008Bailout.htm

Bob Jensen's threads --- http://www.trinity.edu/rjensen/threads.htm

Bob Jensen's Home Page --- http://www.trinity.edu/rjensen/